Planning for retirement is definitely not a passive affair. This is why most people often run into trouble when they discover at the end of the day that their financial position at retirement is weak. You must be part and parcel of it to make resounding success with your retirement.
The reason is that there are certain decisions you will need to take at any given time in the course of building your finances for retirement. These decisions could come when there is an opportunity to make a ‘kill’ or when to withdraw a particular asset as a result of knocking danger.
Though you may not have any challenge with you Contributory Pension Scheme (CPS) if you are an employee covered by the Pension Reform Act 2004, it is also you look at the performance of your PFA as against other PFAs. This will enable you pitch on the transfer window when it eventually takes off.
As experts put it “even when you have a financial adviser or money manager overseeing your investment either in stocks, property or any other kind of investment, it is important that once in a while, you get closer to know the position of your investment and finances.
This will enable you avoid unexpected shocks, help you make alternative plans as well as enable you guide against mismanagement of your investment by third party financial managers.
A finance expert said retirement investing doesn’t have to be a high-maintenance affair. While some people enjoy following the daily ups and downs of their holdings, others don’t want the heartburn — or just don’t care to spend that much time on something that doesn’t require it. And while there’s no such thing as a truly hands-off retirement portfolio — unless you’ve put your whole nest egg into a lifecycle fund, which has some drawbacks — investing well need not be complicated.
If it’s been a while since you’ve looked at your holdings, take a little time now to give your portfolio this simple checkup. A checkup like this every year or so, together with the occasional update as events warrant, will help keep you solidly on course toward your retirement goals.
Review your allocation
Chances are, when you first set up your plan, you used an online asset allocation tool that determined your risk tolerance and told you what kinds of investments to hold. If that was more than a year or two ago, there are a few things you should do:
Rebalance your portfolio. Even if your target asset allocation hasn’t changed, your portfolio has probably drifted from your original allocation. That’s because different asset classes perform differently, and that 5 percent you allocated to a hot stock may have become 11 percent of your portfolio. There’s no need to keep strictly to your desired allocation, and in fact doing so can be detrimental — if a stock or fund is outperforming at the moment, let it run! But as a general rule of thumb, if things have drifted more than a 5 percent away from your target allocation, it’s time to rebalance. You may find you only need to rebalance once every two or three years. Ignore “experts” who tell you to rebalance every few months — making minor changes isn’t worth the effort.
Check for tax efficiency. If your retirement portfolio includes investments in taxable accounts, now’s a good time to make sure your holdings are arranged in a tax-efficient way across accounts. This isn’t something you’ll need to do every year, but it’s easiest to do while you’ve got everything in front of you.
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